Diaper Workshop 2019

Hygienix 2019, Houston, Texas 11 Nov 2019

1 Meet our Houston team and what we do

Laboratory Services + Consulting

→ Performance Benchmarks

→ Reverse Engineering

→ R&D and Product Design

→ Historical Records and Product Evaluation

→ Third Party Quality Control

→ Interpretation and Analysis of all Results R&D through product POLY surgeriesBACKSHEET and substitutions. ADL TOPSHEET CARRIER CORE POLY BACKSHEET

ADL

TOPSHEET

CARRIER CORE

Competitive Intelligence through Reverse Engineering Retainer Packages

→ UNLIMITED performance laboratory tests

→ Monthly support from our team including industry news relevant to your company and price monitoring

→ Discounts to Know Diaper training seminars and other industry events

→ Organizing Focus Groups and/or Home User Tests

→ Consulting time with Carlos Richer and our team Make Better Diapers Mistake: Saturating ADL with adhesives

Hot melt should be sprayed sparsely along the ADL. When hot melt is applied throughout the width and length of the ADL it prevents liquid mobility. Mistake: Lack of adhesives between core wrap & ADL or ADL and Topsheet

Air pockets. Slow acquisition speed

Lack of adhesives can create pockets of air that make entry of liquid less efficient Mistake: Lack of surfactant zone treatment can lead to leakages through cuffs

Mistake: Non continuous hot melt line for leg cuff construction

Hooks de-bond the ear fibres when ears are stretched prior to use and the ear is not well laminated

This results in low Peel forces Avoid hot melt oxidation which happens when tank overheats. This leads to “chemical smell” Not all wetness indicators work well Wetness indicators today look ugly Mistake: Bad lamination in hook and loop tabs and ears SAP only in a target zone SAP at Mid Depth Is the Best

ADL

Clothlike Backsheet SAP variation between diapers

● Easy to measure (with just a $150 USD equipment) ● Why it happens and how to correct it. ● Many times a volumetric feeder works better than a gravimetric feeder Chinese Diaper Regulations Things to take into account when entering the Chinese market. The following are the requirements for approval:

1. Performance: National Standard GB/T 28004-2011 - Topsheet run-off: Less than 20ml - Rewet: less than 10g - Leakage: less than 0.5g

2. Hygiene: National Standard GB/T 15979-2002 - pH value: 4.0-8.0 - Bacterial colonies: Less than 200 cfu/g - Coliform group: Negative - Fungal colonies: Less than 100 cfu/g - P. aeruginosa: Negative - S. aureus: Negative - Hemolytic streptococcus: Negative

WFA: Whitening Fluorescent Agents Asia vs USMCA and EU

Typical US/EU diaper Typical CN diaper: no WFA WFA: Hot Melts, Hooks, Ears Lack of individual QC Traceability in Asia

No vision systems used in China How to find out which is the very best baby diaper or A.I Underwear?

You need a full set of tools and you should try to use as many as possible:

1-Diaper Performance, comparing the absorbent core, chassis, reliability, etc. 2-Consumer Perception, measured by a focus group (softness, cuteness, cost) 3-Visual audits, using statistical sampling

4-Consumer feedback, star rating and overall satisfaction. –Qindex 5-Product performance in real use, measured by Home User Test & Smart Diapers

Note: Each has has its own subjective weight, making it an art! Trends in Baby Diaper Private Labels & New Launches 1010data PLs now account for 15% of online diaper sales

72% growth over the past year vs 11% sales growth

Pampers lost 6% of online market share What is going on?

New brands have been able to take advantage of…

• contract manufacturing through Private Labels • subscription services and e-commerce • internet & social media marketing

…to enter a market where once the barrier of entry was nearly impossible. Timeline

2012 – Honest launches e-commerce subscription service

subscription cute social media eco service patterns worthy claims Timeline

2012 – Honest launches e-commerce subscription service 2015 – 2017 – Parasol, Lilydoo, Joone Paris, Thrive & others

February 2018 – P&G launches Pampers Pure September 2018 – Amazon launches Earth & Eden September 2018 – Ontex launches Big Little Change in Europe January 2019 – Target launches Cloud Island February 2019 – Walmart & Kristen Bell launches Hello Bello July 2019 – KC launches Huggies Special Delivery Who is our consumer? Counties with the oldest first-time mothers

OVER ALL MARRIED COLLEGE+

San Francisco 1 31.9 32.8 33.4 County, Calif.

Manhattan, 2 31.1 32.4 32.9 N.Y.

Pitkin County, 3 31.1 31.5 32.5 Colo.

Falls Church 4 31.1 31.9 32.0 City, Va.

Marin 5 31.1 32.5 33.5 County, Calif. The New York Times 2018 Consumer Disloyalty = New Normal

• 8% of consumers are firm committed loyalists* • 46% of consumers are active explorers*

Marketing to the growing traits of disloyalty, instead of the declining rates of loyalty will be key.

Critical for brands to identify the tendencies in what consumers prioritize -> innovate

Independent PL can react FAST

*The Nielsen Company 2019 Trends in Premium Diapers

• Subscription service • Patterns – cute patterns, faded vs. bold, white • Softer and Thinner • Diaper Pants • Ingredient Transparency • Green and Safe Claims • Plant Based is King Trend: Subscription Service Trend: Subscription Service

Caters to the busy Consumer Can be cheaper/ parent (who isn’t a Benefits wholesale prices busy parent?)

Allows companies to have direct Predictable Brand contact with revenue Owner consumer Benefits Consumer acquisition costs are more worthwhile with recurring billing Subscription Service Models

Honest Model – Optimistic Model size N 1 2 3 4 5 6 lbs <10 8-14 12-18 16-28 22-37 27+ 35+ monthly units 224 245 224 189 161 140 126

Pampers Pure – Conservative Model

size N 1 2 3 4 5 6 lbs <10 8-14 12-18 16-28 22-37 27+ 35+ monthly units 198 186 168 150 132 108 Subscription Service Models

Honest Pampers Pure NB 1 2 3 4 5 1 / NB 2 3 4 5

Expected diaper requirements by 7% 15% 21% 9% size for 36 months 23% 9% 8%

25% 26% 29% 29% Trends in Backsheet Pattern Design Trend: Patterns

• Cute patterns over trademarks / mascot characters Trend: Patterns Limited Edition / Seasonal Patterns Trend: Customizable Pick

• Honest let you pick 7 prints in your monthly diaper subscription • Choose between 12-18 different patterns Trend: Customizable Pick Hello Bello by Walmart Pampers Pure and Hello Bello also offer customizable check-out experience With Hello Bello meeting the same SKU offer Honest does Trend: Bold Patterns to Faded

2017

2018 2019

Trend: White Diapers Trend: Registered Print without mark

USA manufacturers P&G, KC, Domtar, FQ

Others offer random print Or use mark Trends in Packaging Trend: Simple vs Crowded Packaging

• Less redundant claims • Less baby photos • Marketed towards parent (not baby) Trend: Simple vs Crowded Packaging Trend: Simple vs Crowded Packaging

• Valuable real estate focused on claims that differentiate the product

Cloud Island Trend: Softer + Thinner Trend: Softer & Thinner

More predominant 3D embossing Backsheet and topsheet

Higher GSM nonwovens especially in backsheet Coterie Huggies Special Parasol Pampers Delivery Clear+Dry Pure backsheet topsheet topsheet topsheet Trend: Diaper Pants Approx. Diapers and Pants in the USA and Canada 2019 5% 22% Baby Diapers Baby Pants Kids Pants 73%

Approx. No. of Diaper + Pants + Kids Sales for 2019= 27 MM Trend: Diaper Pants

Total Training Pants volume increase 6% Private Label Training Pants volume increased 17.4% In the last 52 weeks according to data by RISI Fastmarkets Oct 2019 Trend: Diaper Pants

Pampers 360 Fit launch March 2019

First time diaper pants are not called “training pants” by multinational in USA

First one to offer size 3 (up from only 4-6) Trend: Green Diapers Safe & Eco Claims

Trend: Green and Safe Claims

• Most common claims: Chlorine Free (TCF), Fragrance Free, Hypoallergenic

• Pulp sourced from sustainably managed forests • Free of: phthalates, parabens, chlorine bleaching, lotions • Not tested on animals CGS 2019 Trend: Plant Based is King PAMPERS PURE Trend: Plant Based Plant-based / polypropylene fiber blend Others with HONEST HUGGIES Premium cotton SPECIAL cotton blended SAP containing topsheets: renewbale DELIVERY ONTEX LITTLE materials polyethylene BIG CHANGE SEVENTH GEN derived from PLA backsheet cotton blend sugarcane sizes NB to 2 backsheet blended into And other PL topsheet and polyethylene made by Ontex waistband derived from EARTH + EDEN mexico corn starch and sugarcane TS Trend: Plant Based Super absorbent core blend is made with renewable, plant-based material that reduces the amount of SAP gel needed

Trend: Ingredient Transparency

Toxicology report shared for consumers to access

Joone Paris Ontex Little Big Change

Premium Products at Accessible Prices Earth + Eden Amazon “eco-friendly” made by First Quality 0.28 Size 4 | 0.33 Swaddlers or Snugglers Cloud Island Premium at “an incredible price” by Domtar 0.28 size 4 | 0.33 Swaddlers or Snugglers Hello Bello HelloParents Bello shouldn’t have to choose between Marcawhat’s de Walmart best for “premium” the baby andpero theireconomica budget. Hecha por Irving en Canada. 0.26 talla 3 By Irving for Walmart 0.32 Size 4 | 0.33 Swaddlers or Snugglers Trends in Premium Diapers

• Subscription service • Patterns – cute patterns, faded vs. bold, white • Softer and Thinner • Diaper Pants • Ingredient Transparency • Green and Safe Claims • Plant Based is King Post-Consumer Processing

Sustainability Sustainability Post Consumer Processing

Compostable/Degradable Synthetic Materials Materials

Composted? NO Recycling? YES Composted? YES Recycling? NO Product Claims • Common claims that every product has. • Lasts 12 hours, super absorbent, super soft, etc.…

• Environmental claims. Sustainability and Biodegradation. • FSC Certified, Compostable, Biodegradable, Certified Eco-Friendly, use of Eco- Friendly Raw Materials, Non-bleached pulp, Chlorine-free, etc.…

• Health related claims. • Nontoxic diapers, Hypoallergenic, Dermatologically tested. • Free of fragrances, heavy metals, dyes or inks, latex, rubber, gluten, GMO, phthalates, parabens, WFAs, etc.….

• Some brands exaggerate their claims, or outright lie about them, leading to loss of trust. • FDA approved (FDA does not regulate diapers), Chemical Free, Guaranteed Skin Friendly. Diaper Eco Products: Environmental Claims and Examples of Liability Risks ClaimsClaims relatedrelated to fluff Pulp: to Dioxinsfluff and Pulp: Chlorine Dioxins Free and Chlorine Free

Elemental chlorine free (ECF) is a technique that uses chlorine dioxide for the Elementalbleaching chlorine of wood pulp. free It(ECF) does notis a use technique elemental that chlorine uses gaschlorine during dioxide the bleachingfor the bleachingprocess of and wood prevents pulp .the It doesformation not useof dioxins elemental and dioxin chlorine-like gascompounds, during thecarcinogens. bleaching process and prevents the formation of dioxins and dioxin-like compounds, carcinogens.

Totally chlorine free (TCF) is paper that does not use any chlorine compounds for Totallywood chlorine pulp bleaching. free (TCF) is paper that does not use any chlorine compounds for wood pulp bleaching. The European Commission and US Environmental Protection Agency have recognized ECF bleaching as “Best Available Techniques”. The modern The European Commission and US Environmental Protection Agency have ECF pulp mills use bio-activated sludge in wastewater treatment, so the recognizedwater released ECF bleaching back to the as watercourses “Best Available is virtually Techniques free of” .toxic The modern ECF pulpsubstances. mills use bio-activated sludge in wastewater treatment, so the water released back to the watercourses is virtually free of toxic substances.

53 • Modern ECF bleaching provides pulp with the same or even lower environmental impacts than TCF.

• ECF bleaching, in combination with oxygen delignification, provides - with lower energy consumption - higher yield and produces stronger fibers compared to TCF bleaching.

• This, in turn, enhances the ability to recycle the products made out of the pulp and contributes to more efficient use of wood resources.

• ECF pulp also has higher brightness than TCF pulp. Sustainability in SAP

• It is mostly used just for the biodegradable/natural claim. Deceptive. • Scalability may be an issue with some pilot lab prototypes (PGA, Orange-SAP). • They are mixed with synthetic super absorbents (less always better). • They have good free swell capacity but poor AUL (bleeding). • We have not tested the new (PGA) Bio-SAP. • Possibility of implementing K-SAP back into eco-friendly compostable products. The Challenge - Summary

• Claims lose their strength when used lightly or deceptively. • Using biodegradable or naturally sourced raw materials is preferable to petroleum-based materials, the downside is the loss in product performance. • Current offerings of PLA are not biodegradable in natural conditions, only in industrial reactors. • Viscose is compostable and biodegradable, but the common manufacturing process is not environmentally or worker friendly. • ECF vs. TCF continues to be a debate with consumers for a preference. Consumers concerned with chlorine presence more than environment. • Current offerings of Bio-SAP do not reach desired performance and absorption in products and must be mixed with synthetic SAP. Post Consumer Diaper Processing Typical Soiled Baby Diaper

43% 50%

7% Water Feces Reusable Materials Reusable Materials in a Baby Diaper Total weight= 30 grams 5%

30% 33%

32% Paper Derivatives: Fluff pulp, Curly pulp, and Tissue Core Wrap Plastics: Nonwovens, Film, Hook and Loop, and NW Core Wrap Sodium Polyacrylate (SAP) Others (Spandex and hot melts) Diaper Recycling Post-Consumer Diaper Recycling Current Options

• Direct Incineration • Loss of energy due to water evaporation • Biodegradation • Really bad option if no methane is recovered • Thermal Pressure Hydrolysis (TPH), Elsinga, NL (Expected Feb 2018). • Incineration with SAP de-activation (CaCl2) and water removal (RDF). • Nagoya Group in Japan launched a new RDF fuel in Sep 2018 (Hoki, Japan) • The Know-Waste (liquid sterilization, No SAP recovery). • Diaper Recycling proposal for air-born sterilizing. • Terracycle (Gamma Ray and separation, expensive, no SAP recovery). • Unicharm (RDF, using Ozone from fuel cell for recovering clean pulp). • P&G-Fater (recycling pulp and plastics, no incineration) Biggest Challenge for Post-Consumer Recycling

• Need of separate bins and centralize collection (special stream) • Collection and freight costs for soiled diapers and RDF • Installing Recycling Factory away from the city Avoiding the use of special stream → Use of scanning systems with optical sorting and infrared vision → Use of ultrasonic sensors to detect bag with diapers automatically. → Provide RFID tags with diapers sold, consumer adds tag to soiled bags → Add a digital water marking to each diaper → Usage of a trash disposal bag that can release air when pressure is applied to prevent blowouts in garbage trucks or recollection systems. Diaper Composting Using PLA and Viscose in diapers

• PLA -> Not biodegradable in natural condition, only in industrial conditions. • Some products with a PLA backsheet have leaks and humidity going through it. • Viscose -> Biodegradable, compostable. Uses heavy pollutants for manufacturing process. E.g. Carbon Disulfide process. • Performance in diapers is affected due to the tendency for viscose to be absorbent. With an absorbent (hydrophilic) topsheet, rewets tend to be higher, promoting humid skin for the user. • K-SAP… Could we go back to agricultural SAP for use after composting? Aerated Static Pile Composting Composting • When a diaper is rolled up into a “burrito” after use, the composting of the cellulose within becomes very difficult. Therefore, specific raw materials like PLA and Viscose are required. • The key parts to allow for composting to work are the backsheet and carrier materials. • Describing the percentage of material that may be compostable could be based on the weight of the soiled diaper, not the weight of the dry diaper. Once the backsheet has been successfully degraded, the feces and urine are accessible to the process. • What can be done regarding sterilization of the materials before composting? Composting

• Parts of the product that cannot be composted are removed from the compost through a screening process after the composting is complete. • Since the composting is done under Aerated conditions there is little to no production of Methane gas. • The SAP remains with the compost and becomes part of the topsoil blend of the final product. • Careful with having excess sodium in the soil! THE U.S.

Product Benchmarks We have published our most recent benchmark report for the U.S. market. For more information please go to: diapertesting.com/reports PERCEPTION Exploring Amazon reviews 2018-2019

Consumer Complaints Methodology

Out of 7 brands: 1. Earth & Eden 2. Honest 3. Honest Overnight 4. Huggies Special Delivery 5. Huggies Little Snugglers 6. Pampers Pure 7. Pampers Swaddlers Comparing and Analyzing Negative Reviews (1-3 stars) found on Amazon Total of Negative Reviews: 1,427 Total of Complaints (from reviews): 2,260

*Reviews Analized from January 2018 to November 2019 Diaper Performance Absorbency, Blowouts, Leakages, Rashes

Diaper Construction Component detaching, Cuts/scratches, Diaper tears off/falls apart, Feels cheap/poor quality, Feels plasticy, Loose fluff/nonwoven threads, Hotmelt blobs, Hook & Loop / Ears detaching, SAP “dry” crystal chunks, SAP leakages, Stiff/hard/rough

Reliability Diapers missing inside bag, Diapers inside bag are wrong size, Diapers came folded/scrunched up, Consistency of product (performance: sizes design), Sudden change of Specifications (preference over “old version”) CLASSIFIED INTO CATEGORIES CATEGORIES CLASSIFIED INTO Fit Diaper runs big, Diaper runs small, Saggy/hangs, Strange Fit

Designs Bulky/thick, Too thin/flimsy, Lack of wetness indicator, Ugly design patterns

Price Too expensive, waste of money, not getting money’s worth

Odor/Smell Strong chemical smell, Fragranced too much, Diaper doesn’t mask urine & feces smell

Green Harsh Ingredients, Not biodegradable, Tested on animals, Not hypoallergenic CLASSIFIED INTO CATEGORIES CATEGORIES CLASSIFIED INTO Consumer Complaints by Category

1% 4% Diaper Performance 6% Construction 7% Reliability 7% 46% Fit Design 12% Price

17% Odor/ Smell Green

Earth & Eden, Honest, Honest Overnight, Huggies Special Delivery, Huggies Little Snugglers, Pampers Pure, Pampers Swaddlers Based on 2,260 complaints on 1, 2 and 3 star reviews on Amazon from Jan 2018 to November 2019 Diaper Performance 46% Of Total Complaints

1. A piece of absorbent 6% material wrapped around a baby’s bottom and between its legs to ABSORB and 20% Leakages RETAIN urine and feces Rashes 53% Absorbency Blowouts 21%

Earth & Eden, Honest, Honest Overnight, Huggies Special Delivery, Huggies Little Snugglers, Pampers Pure, Pampers Swaddlers Based on 2,260 complaints on 1, 2 and 3 star reviews on Amazon from Jan 2018 to November 2019 Diaper Construction 17% Of Total Complaints

2% 1% 1% 3% 2% 4% 17% 5% 7% 14% 10% 13% 10% 10%

Earth & Eden, Honest, Honest Overnight, Huggies Special Delivery, Huggies Little Snugglers, Pampers Pure, Pampers Swaddlers. Based on 2,260 complaints on 1, 2 and 3 star reviews on Amazon from Jan 2018 to November 2019 THE WORLD Exploring the worldwide market and growth potential

Global Perspectives Global trends for Baby/Pants?

● Birth rates are going down everywhere ● Many countries now with negative growth for diaper sales ● China´s policy to open up for more babies is not working Source: Wikipedia

Baby Pants sales are growing while baby diapers go down

● India showing unprecedented growth, 90% of sales today are baby pants. ● Clearly baby pants are not for toddlers anymore (NB, S, M). ● P&G launches Baby Pants intended not just for training. ● Three piece baby pant is the new standard worldwide (P&G and KC) ● KC launching three piece pants in Mexico, Asia and everywhere else. ● Will KC launch Baby Pants with the 3 piece chassis in USA? I think they will! Update on the Trade War, Nov 2019

● Several PL brands imported from Chinas are suffering today ● Most of these Chinese brands are being sold successfully in Premium Tears ● Those millions of diapers imported from China will need to go somewhere else. ● Will the Chinese Elite finally accept premium Chinese made products? ● What will happen with Japanese sales? ● Most critical baby pant patents are about to expire. ● USA needs to be ready. Lucky for our industry we still have a bright future

● Light Incontinence and Adult Underwear for active people ● Adult briefs are at least 3 times larger than Baby products

Adult Incontinence USA 2018 Market Share by Chassis Type

22%

45%

34%

Adult Briefs (with tapes) Pull Up / Disposable Underwear Light Incontinence Pads/Guards ADULT DIAPERS USA -TOP BRANDS 2018 Adult Incontinence Sales USA Millions of Dollars USA Top 10 brands * (2018)

83 228 12.5%

918 50.5% 586 32.2%

Kimberly Clark POthersrivate Label Procter & Gamble Essity-SCA

Source: Statista March 2019

Global Trends for A.I. products:

● Light Incontinence will continue as the largest market share. ● Adult underwear will take market share of adult briefs in the active adult market ● Institutional Products will evolve to smart devices but will continue to be briefs. ● Special male pads will be used instead of briefs by men in institutional market ● Female guards will be used instead of briefs by women in institutional markets THE FUTURE New gadgets, recently launched products, unmet needs, and the future of diapers Looking Forward Quickchange: Male Incontinence Pads Quickchange

The Viscose Analogy for SAP

● First diapers back in the 60´s used Rayon. ● Today some products are using Viscose (from Pine or from Bamboo) ● First SAPs ever used in diapers were using Potassium Polyacrylates ● A new kind of K-SAP needed for Diaper Recycling and Industrial Composting An update on Ecovia: PGA- Bio SAP

UFM X-Top

Show samples and talk About ** Opportunities ** Smart Sensors in Baby Diapers and their Evolution

Rethinking Incontinence Care Wearable sensor technology is improving the quality of life for residents at care facilities

• Huggies in South Korea launched Oct 2018 coming to US 2019 Maybe??? • Lumi by Pampers announced this summer 2019 to launch this Fall • Dyper to sell Sense tracker as well very soon Unmet needs for babies and bedridden adults

● Diaper Rash. ● Explore alternatives on how to address this critical problem. ● Using Big Data to improve product design. Reminder… What can we do? Risk of skin rash or infection, IAD risk

Liquid Feces with Urine

Formed Feces with Urine

Just Urine and no feces

Proceedings from the Global IAD Expert Panel Journal of Aging Life Care, also published Jan 2018 Abena Skin Health Potential Sensors for Detecting Feces

1-A nanoporous interferometric micro-sensor for biomedical detection of volatile Sulphur compounds 2-Electrochemical sensors composed of a ceramic–metallic (cermet) solid electrolyte are used for the detection of gaseous sulfur compounds SO2, H2S, and CS2 in a study involving 11 toxic industrial chemical (TIC) compounds.

3-The sensor may be in a separate location near the user, not necessarily attached to the diaper. A reminder that we still need a better way to sell baby diapers

Where is the baby tailor? Thank you